The Tories are no longer riven by Europe. They have become a party unified by British nationalism and hatred of the liberal country that Britain has become. Their gathering in Blackpool last week was not so much a party conference in the traditional meaning of the term as a festival of the depressed. In the hangover that is sure to follow, the Tories could find themselves lurching into another electoral collapse.

For the Tory left the war is over. Michael Heseltine and Kenneth Clarke have been consigned to the margins of their party, probably for good. William Hague has chosen not to resist the nationalist ratchet effect which is pushing the Tories towards a policy that can only mean quitting Europe. Instead he has allied himself with the atavistic forces that are driving it. In terms of party management his strategy is working well. True, the lingering one-nation, pro-European Tories are a reminder to voters of the party's past divisions, but after the next election they will largely disappear from view. In electoral terms, on the other hand, Hague's strategy is suicidal. Reconstructing the Tories as a neo-Powellite party can only lock them in permanent opposition.

Hague's legacy looks like being a party that has overcome its divisions by renouncing any prospect of ever forming a government. So far this has not put his leadership at risk. One side effect of the wipe-out of May 1997 was to give the shrunken band of Tory MPs a sense that their seats were safe. Having fallen so far, they could not believe that Tory support could fall yet further. Their mood could change if the party's showing in the opinion polls does not improve. If, as seems likely, the Tory vote in the general election does not significantly recover, or falls further, Hague will quickly become the youngest ever former Tory leader.

Who succeeds him matters a good deal less than is commonly believed. To be sure, a Tory party led by Michael Portillo would be quite different from one led by Ann Widdecombe. Portillo's goal is to take the Tories back on to the centre ground. He surely understands - even if his followers do not - that a single-issue, anti-European party has no future. Its reason to exist will vanish the moment the issue of Britain's membership of the euro has been settled. However histrionic his declamations of British nationalism, Portillo must be looking ahead to a time when defeat in a euro referendum allows the Tories to make a fresh start. In the aftermath, it would not be surprising if this charismatic chameleon were to reinvent himself as a pro-European. It is fast becoming conventional wisdom that the Tories - led by Portillo - will reinvent themselves as a serious political force in the wake of just such a defeat. It would be unwise to bank on it. If Portillo becomes leader, the Tory party he takes over will be the nationalist rump that William Hague has created. Doing a volte face on Europe will not be easy. It will be all the harder because Portillo straddles what is now his party's biggest divide - between social liberals and moral authoritarians. What he has revealed of his personal history has not inspired trust among Thatcherites, or endeared him with the traditionalist constituency Tories. The party will not easily warm to Portillo as leader. The dark musings on "sexual deviancy" to which Lord Tebbit gave vent in Blackpool are a portent of what may be in store for him.

It is not inconceivable that another electoral rout will give the upper hand to the majority in the Tory party which spurns liberal values. In that case Ann Widdecombe could stand a real chance of becoming leader. There is a coterie of metropolitan reactionaries, well represented in the rightwing press, that seems genuinely to believe that the country at large is yearning to return to "traditional values". In a society that is predominantly liberal, however, a party that harks back to a repressive past will never be more than a sect.

What Blackpool revealed was a party in full flight from reality. Its eminence grise pronounced that all Britain's evils come from continental Europe. Lady Thatcher and her acolytes cannot have noticed that the ideas and movements for which she reserves her greatest contempt - political correctness and multiculturalism, for example - are largely native to the English-speaking world, and nowhere more powerful or entrenched than in the US.

Again, John Maples demanded that Britain's treaties with the EU be comprehensively renegotiated. It is a stance that makes sense only when it is backed up with the threat of withdrawal from the EU and combined with an equally comprehensive renegotiation of Britain's relations with the US. The fact seems to have eluded the shadow foreign secretary that the US has supported British engagement in Europe for decades. Yet again, speaker after speaker condemned the EU as a foreign conspiracy against the global free market. It seems not to have occurred to them that the global market is made up chiefly of foreigners.

When a party is so far gone in fantasy and denial, psychopathology may be more useful as an aid in understanding its condition than psephology. The Tories who cheered William Hague at Blackpool were voicing contradictory emotions - the manic certainty that they embody the instincts of the British people, and the depressed realisation that they are in fact no more than an alienated and declining minority. A party whose policies embody these contradictions cannot be an effective opposition, let alone an alternative government.

The Tories' reunification around a nationalist agenda augurs a long period of Labour hegemony. Yet it is a situation not without risks for the government. The greatest concerns the euro. By flirting with the nonexistent option of withdrawing from the EU the Tories have made it easier to hold and win a referendum on joining the single currency early in the next parliament. Yet if the government succumbs to this temptation it will mortgage its future to a dangerously flawed version of the European project.

There is a broader danger. It is wrong for any government to anathematise all conservative values. That was the mistake made by Margaret Thatcher and her followers, when they came to view most of Britain's institutions as not much more than impediments to business enterprise. It is partly the fact that the Conservative party became so closely identified with a crude modernising project that accounts for its collapse. The Tory debacle is a warning. There is more to governing Britain than modernisation.